This paper suggests the issues that may face Cuba and enterprises, including U.S. based enterprises, in the wake of normalization. After the introduction, Part II considers briefly the local legal and political context in which enterprises may operate in Cuba, with particular focus on Ley No. 118/2014 (De la Inversión Extranjera), and its contextualization within the legal structures of Cuban macro-economic policy. Part III then outlines two important standards systems for global CSR with effect in Cuba, the OECD’s Guidelines for Multinational Enterprises and the U.N. Guiding Principles for Business and Human Rights. Part IV then considers the ways in which MNEs may have to approach their investment activities in light of these standards, the pressures for change they might produce, and the adverse effects their adverse effects on MNE decisions to invest or operate in Cuba.

1. ASCE’s Twenty Fifth Annual Meeting: “Cuba–What’s next?”
July 30-August 1, 2015
Global Corporate Social Responsibility (GCSR) Standards With Cuban
Characteristics: What Normalization Means for Transnational Enterprise
Activity in Cuba
Larry Catá Backer
W. Richard and Mary Eshelman Faculty Scholar, Professor of Law and International Affairs
Pennsylvania State University

2. Context
• The 2014 move toward normalization between the U.S. and Cuba has
substantial repercussions beyond the scope of its terms.
• For the economic, political and legal sectors, these repercussions touch
on legal or societal constraints of global standards faced by MNEs
seeking to operate in Cuba.
• The projection of these global standards within Cuba may pose
difficulties and produce pressure for legal-economic reform within Cuba.
• Those pressures may be particularly acute with respect to issues now
understood as subjects of corporate social responsibility.
• Two questions arise:
– How will the Cuban state incorporate these norm?
– How will MNE apply these norms to their dealing within Cuba?

3. Roadmap
• Structure of legal regulation of inbound foreign
investment.
• Evolving international business norms
– Soft law
– Hard law
– Remedial structures
• Points of conflict and convergence
– Ideological
– pragmatic

4. Cuban Foreign Investment Law
Ley No. 118/2014
• Basic structure evidences competing visions of economic planners
– Opening up investment in larger number of economic sectors
– Central planning and large state (and military) enterprises will continue to drive the
economy with a small private sector.
– Foreign investment will be treated as a species of state to state activity.
– Authorization granted on basis of business proposals to the Ministry of Foreign Trade
and Foreign Investment (MINCEX), which relies on Business Evaluation Commission,
(8 ministries and the Central Bank of Cub)a, to assess the proposals.
• Implementation clues: Portfolio of Opportunities for Foreign Investment .
– Firms must “guarantee” foreign markets, business plans must provide projections on
the impact on the balance of payments.
– Cuban government will “favor the diversification of different countries.”
– Privatization of state-held enterprises is ruled out (although the transformation of
smaller state businesses into cooperatives in the service and construction sectors is
proceeding apace).
– Foreign investment may partner with cooperatives but not with the emerging small-
scale private enterprise.

5. International Norm Structures
• Basic structures
• Operation
• Link between social
norms, markets,
international law and
national law
• Hard law—none
– New comprehensive
Business and Human
Rights Treaty?
• Examples
– UN Guiding Principles
– OECD Guidelines for
MNEs
– BITs with Human Rights
Components
– 3rd Party Standards
– MNE internal norms
5

6. UNGP
– Endorsed by UN Human Rights Council—Including Cuba
– 3 part structure
• State duty to protect human rights
– Extends no further than legal obligations of state
– Opens the door to extraterritorial application
• Corporate responsibility to respect human rights
– International bill of human rights
– Human rights due diligence
– Obligation to work around host state restrictions
• Remedial obligations for states and enterprises
– Principally through state
– Also international and private mechanisms

7. OECD Guidelines for Multinationals
• The Guidelines are recommendations jointly addressed by governments
to multinational enterprises.
– They provide principles and standards of good practice consistent
with applicable laws and internationally recognised standards.
– Observance of the Guidelines by enterprises is voluntary and not
legally enforceable.
• Cover a number of general areas
– transparency/disclosure, human rights, employment/industrial
relations, environmental issues, bribery/corruption, consumer
protection, technology transfer, anti-competitive schemes, and
taxation
• Complaint procedures through National Contact Points.
– Have been used increasingly in two contexts
• NGOs to advance international normative agenda
• Labor unions to leverage national litigation

8. BITs with Human Rights Elements
--Bilateral Investment Treaties typically deal with
investment and investment protection
--Cuban Bits tend to focus on state prerogatives
--Most others
internationalize national law
discriminate in favor of foreign investors over domestic
stabilization provisions protect investment against later state law.
--New feature—bringing in human rights norms to business
behaviors as a trump to state practice
--produce strong enforcement mechanism through
arbitration
--TPP generalizes the model

9. 3rd Party Private Standards
– GRI (Global Reporting Initiative)
• Social, economic and rights based reporting of economic
activity
– Private public partnerships
• ISO 26000 CSR
– Private organizations
• Certification of compliance with their standards
• Monitoring

10. Internal MNE Norms
– Largest MNEs already have harmonized and sometimes
complex systems of CSR based control of its supply and
production chain throughout their global operations
• WALMART
• APPLE
• NIKE
• Target
• El Cortes Inglés

11. Convergence
– Pressure from outside?
• Almost 5,000 global enterprises have some dealing with Cuba
• Most are embedded in international norm systems
– Environmental sustainability as a wedge?
– Convergence of norms through BITs?
– Embedding through central planning and approval
process in current law?
• Internalized macroeconomic planning and policy.
– Imposed by global actors?
• part of efforts to join WTO or acquire loans from IMF?
• Will the new Asian Infrastructure Bank provide an
alternative?

12. Conflict
– Issues
• Will an enterprise forego its CSR policies as part of an
investment agreement with Cuba
• Will foregoing CSR open MNEs to a specific instance before
a National Contact Point?
• To what extent will extraterritorial application of foreign
law (US-EU) impede trade deals with foreign MNEs?
• Will global certification NGOs be permitted access to MNE
operations in Cuba? If not what ramifications?
• What alternatives for MNEs resulting from adverse human
rights due diligence under UNGPs?
• Application of rules for weak government zones for Cuba?

13. THANKS
For more information please contact
author at lcb911@gm,ail.com